It's estimated that around half of all borrowers could save money by switching to a cheaper mortgage deal. People are often continuing to pay the lender's standard variable mortgage rate through sheer inertia, when switching to a cheaper mortgage is an easy way to save money.
A borrower with a £150,000 loan on a standard variable rate
could potentially save around £1,500 per annum for each percentage
point reduction in the interest rate. Re-mortgaging is a process
which has has become much easier in recent years as more and more
people now do it. Some lenders are even offering specialist
re-mortgaging facilities with free legal and arrangement fees.
Re-mortgaging is not always about saving you money. Landlords especially, can re-mortgage as a way of releasing some of the equity which has built-up in their property's value over a period of time and use the proceeds as deposits to buy more investment properties.
Many landlords,
in a rising property market, have done this to their advantage and
built-up sizeable portfolios of rental properties very quickly.
If you are tempted to release equity in this way it's wise to
be cautious now as the property market appears more fully valued
than before and though interest rates are still low, they could well
rise in the future. Any shocks in the economy could trigger a slide
in property prices which will put you under pressure if you are too
highly geared (if your borrowings are too high a proportion
of your property's value). Borrowing through your mortgage may
still be your cheapest option, but remember the loan is secured on your property and you
could lose it if the situation changes and you can no longer afford
to make the monthly payments.
Your first move is to check the terms and conditions applying to your current mortgage. If you are tied-in to your mortgage deal or there are high redemption penalties (repayment charges) you have to decide if it's worth switching or staying put until these penalties expire.
Expect to shop around for a better deal these days as
being loyal to any financial institution is not rewarded by any
concessions on rates of interest. Making the change can be done
simply, either by going direct to a lender or a mortgage broker who
will assess the market for you.
The main advantage of using a mortgage broker like Home Saver
Mortgages and Loans is that
we use our expertise to compare different lenders for you, some of
which may be offering special deals not readily available on the
High Street.
Information here is general only & believed to be correct, though we cannot guarantee it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before making decisions. Investments can go down in value as well as up over time.
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